Baby Boomer Client Issues: Caring for Aging Parentsby
Pity those baby boomers in the sandwich generation. Their children have left the nest after an expensive college experience. Perhaps graduate school was involved. A recent article in The New Yorker observed, “College is the new 12th grade.” Their next concern is caring for their aging parents. How can you advise them?
What’s the Real Issue?
We are living longer. In 1940, the average life expectancy in the United States was about 63 years. In 1960, it climbed to 70. In 2010, it reached about 79. Sixty-five million Americans, about 29 percent of the population, are caregivers, spending an average of 20 hours weekly caring for a family member. In most cases it’s daughters caring for their mothers.
The most mercenary of children may see their expected inheritance depleted by long-term healthcare costs. (Admit it, you know some of those folks.) The most mercenary of seniors feel the promise of eventual inheritance buys them unlimited free labor and care from family members. (You know some of them, too!)
From a more reasonable perspective, boomers and their aging parents separately realize a different kind of care is needed, but nursing homes still carry negative connotations. The aging parents are reluctant to surrender their independence. They don’t want to be a burden.
What’s the Wrong Solution?
You’ve heard younger family members joke, “If you get ill, I’m just pulling the plug.” This doesn’t happen in practice. Remember the furor that arose about end-of-life doctor/patient discussions within the context of Obamacare? How about right-to-die legislation where terminally ill patients could request lethal drugs? Lots of controversy surrounding greedy relatives’ wishes here.
Some boomers with siblings might pass the buck, saying: “She can live with my brother. He has no children.” Perhaps he has “responsibility issues.” Then there’s the “old folks home” option, their worst fear.
What’s the Risk of Not Addressing the Issue?
Why should you wade into an emotionally charged issue? For starters, you are the family’s tax advisor, working with multiple generations. You are a step removed from the problem, able to see things more clearly. You understand money. On the human side, you don’t want to see everyone resenting everyone else in the family.
There are benefits to helping with the issue. It strengthens the relationship. You are a problem solver.
What’s the Right Solution?
There may be plenty of misunderstanding going on here. If you know the older parents well enough (i.e., clients), you might ask what their wishes are. It’s likely they want to pass the house and assets to their children. If they’ve got plenty of assets, estate taxes might be involved.
They have both investment and physical assets. Here’s where the confusion comes in: They are living in that large, wooden period house because they want to pass the home where their children were raised to them. Meanwhile, their grown children are happy in their current homes. They see that big house as a white elephant with high maintenance costs, rising property taxes, and plenty of accident potential. But no one is talking, so this misconception continues.
Consider alternatives. How about downsizing? Maybe moving to an over-55 community where you just lock the door if you head out on vacation. Selling the big house frees up lots of cash, which could be used to fund their smaller home and leave cash available to distribute to children and grandchildren, help with college educations, etc.
They might buy into a more sophisticated retirement community where they pay an upfront sum and monthly fees. As the parents age, they transition into health-related or skilled nursing facilities, often covered by the monthly fees they are paying for years while they are healthier. All these options require further research on the client’s part.
“It’s my (their) money” is a good starting point for conversations. You need to know when to bow out, yet you might get the ball rolling by getting each part of the family looking at the bigger picture instead of ignoring it.
Bryce Sanders is president of Perceptive Business Solutions Inc. in New Hope, Pennsylvania. He provides high-net-worth client acquisition training for the financial services industry. His book, Captivating the Wealthy Investor, can be found on Amazon.com.